According to a
JPMorgan Chase & Co
) has cut down the remuneration of its investment bankers and
traders by nearly 3% for 2012. The impact of the unsettling
economies of the U.S. and Europe has contributed primarily to the
diminished compensation to employees.
However, portfolio managers and other executives in the asset
management division will receive an average 6% hike in salary and
bonuses. Senior investment bankers and traders have braced for
reductions exceeding 10% to safeguard the junior and mid-level
staff from sharper reductions.
The anticipation of diminished compensation comes in the wake of
lesser activities at JPMorgan's investment banking division. Net
income at the investment bank for the first 9 months of 2012,
before it was merged with the Corporate Bank and Treasury
Services division, plunged 15% from the comparable prior period
to $5.2 billion.
Moreover, JPMorgan's Chief Executive Officer (CEO), Jamie Dimon
has faced a 50% cut in his pay. His negligence in derivatives
trading activities in the company's Chief Investment Office,
leading to a multi billion-dollar loss, was primarily responsible
for this pay cut.
JPMorgan joins a host of other banking giants that are stressing
upon expense-reduction initiatives to counter a sluggish economic
recovery. In addition to shutting down non-core units and opting
for layoffs, these firms have started to slash remuneration to
contain the spiraling costs.
Similar to JPMorgan,
) has reduced compensations of its investment-banking unit by 8%
and bonuses of roughly 20% of the employees have been put on
hold. Moreover, this trend is not just limited to the U.S. banks.
Among European banks, Frankfurt-based
Deutsche Bank AG
) lowered its 2012 bonus pool by 11% to €3.2 billion.
) is also expected to slash bonuses for investment bankers for
2012 by roughly 20%, in order to augment its profit levels.
We believe in a slow economic recovery, generating revenues has
become a challenge. Therefore, to maintain and elevate
profitability, banks are undertaking cost reduction measures such
as layoffs and bonus cuts. Until economic recovery gains
momentum, such actions are expected to boost profitability.
JPMorgan currently retains a Zacks Rank #3 (Hold).
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